Lecture 15 - Outline I Legal Structures for New Businesses...

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5/28/2007 1 Outline - I Legal Structures for New Businesses – Basic forms Sole Proprietorship 5/28/2007 • Partnership • Corporation – Recent forms Limited Partnerships Limited Liability Companies (LLCs) • S-Corps Outline - II Protecting your business – Patents – Copyrights 5/28/2007 Copyrights – Trademarks Legal Structure – Things to think about Liability issues 5/28/2007 • Taxes
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5/28/2007 2 Sole Proprietorship - I Not a separate legal entity – the owner is the business. 5/28/2007 • Advantages: Easy to form (very small registration fees). Profits “pass through” directly from business to owner and are taxed as personal income (~35%). No corporate business taxes. Losses can be deducted from other personal income sources. Sole Proprietorship - II • Disadvantages – No Limited Liability – individual proprietor is responsible for all business debts. 5/28/2007 – Lack of continuity – e.g. if owner dies, business disappears (although assets go to estate). – Not really possible to raise equity capital. Partnership - I Similar to a sole proprietorship except more than one person. Again not a separate legal entity. 5/28/2007 • Need detailed contract stating how profits will be distributed etc. Advantages – again fairly easy to form, and profits “pass through” and face no corporate taxes.
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